Transportation Is Now the Number-One Worry of CPG Supply Chain Leaders, According to a New BCG Report; Tackling the Litany of Challenges With a Comprehensive Suite of Tactics Can Help CPGs Come Out Ahead

Since the last BCG/GMA survey in 2012, CPG companies' freight costs have risen to 14 percent, reversing all other supply chain cost-saving efforts. Already, the CPG industry spends about $15.5 billion each year on transportation. "Supply chain leaders are caught between two challenging transportation trends, as they either must pay more to meet service-level expectations or sacrifice speed and reliability for cost efficiency," says Daniel Triot, Senior Director of the Trading Partner Alliance of the Food Marketing Institute and Grocery Manufacturers Association. "That is hardly a prescription for long-term success."

The report shows that driver shortages and chronic capacity squeezes, along with growing congestion and delays, are threatening delivery times, inventory management, and service levels. Aging transportation infrastructure takes a big part of the blame. "Supply chain leaders used to view transportation problems as cyclical, but these problems are here to stay," says Peter Dawe, a BCG partner and coauthor of the report. "Now we're seeing such an acute capacity shortage that it can be near impossible to get loads on some lanes moving. Transportation is becoming a strategic planning consideration, not a simple commodity to be sourced."

A variety of tactics, when organized as a part of a comprehensive plan, can go a long way toward overcoming the challenges. Such tactics include everything from efficiency moves and the choice of ownership model to new partnership approaches (with customers, carriers, and even other manufacturers) and network redesign. Some CPG companies, such as Procter & Gamble, Bumble Bee, and Land O'Lakes, are already deploying this approach -- and achieving results. BCG estimates that implementing a suite of tactics within an integrated approach can lead to a potential cost savings of 7 percent of transportation spending, or roughly $1 billion, industrywide.

"Some CPGs are going back to the fundamentals and making sure all of their systems operate at peak efficiency," says Elfrun von Koeller, a principal at BCG and coauthor of the report. "Others are integrating transportation within the supply chain strategic agenda." Because today's complex transportation challenges fall beyond supply chain leaders' traditional purview, making transportation a more important part of the business conversation can go a long way in mitigating its bottom-line impact -- which BCG estimates to be as much as 5 percentage points.

By partnering with business unit and enterprise leaders, supply chain leaders can more effectively apply these tactical solutions in a holistic way -- and restore and build on the important performance gains of recent years. "There is no silver bullet, but those CPG companies that recognize and address the need for a comprehensive response will enjoy competitive advantage," Dawe says.

A Hard Road is the first in a series of reports on the joint BCG/GMA 2015 Benchmarking Study. Soon to follow will be reports on the study's top findings, segmentation, and direct store delivery (DSD) practices.

About the Grocery Manufacturers AssociationBased in Washington, D.C., the Grocery Manufacturers Association is the voice of more than 300 leading food, beverage and consumer product companies that sustain and enhance the quality of life for hundreds of millions of people in the United States and around the globe.

Founded in 1908, GMA is an active, vocal advocate for its member companies and a trusted source of information about the industry and the products consumers rely on and enjoy every day. The association and its member companies are committed to meeting the needs of consumers through product innovation, responsible business practices and effective public policy solutions developed through a genuine partnership with policymakers and other stakeholders.

In keeping with its founding principles, GMA helps its members produce safe products through a strong and ongoing commitment to scientific research, testing and evaluation and to providing consumers with the products, tools and information they need to achieve a healthy diet and an active lifestyle. The food, beverage and consumer packaged goods industry in the United States generates sales of $2.1 trillion annually, employs 14 million workers and contributes $1 trillion in added value to the economy every year.

About The Boston Consulting GroupThe Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 82 offices in 46 countries. For more information, please visit bcg.com.

About bcgperspectives.comBcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed by PC, mobile, iPad, Facebook, Twitter and LinkedIn.